Federal Reserve Chairman Jerome Powell said it would be appropriate for the central bank to raise interest rates by 0.25% at its meeting in two weeks’ time. inflationbut declined to predict how the Russia-Ukraine war would affect the US economy.
“I think it is appropriate to move forward. Inflation is too high, “he told the House Financial Services Commission.
“I am inclined to propose and support an increase in interest rates by 25 basis points,” Powell continued, adding that interest rates could rise more aggressively depending on the effects of the war in Ukraine.
He told lawmakers that the consequences of US sanctions against Russia at home were “very uncertain”.
“The ultimate economic consequences of the war, all the sanctions and events that are yet to come, are very uncertain, and we need to understand that.”
Powell said that the inflation that the nation is facing now is “nothing like nothing we have experienced for decades … not only is it different, it comes from the commodities sector.”
“I think it is appropriate to move forward. Inflation is too high, “Powell said in a statement to the House Financial Services Commission.
“I am inclined to propose and support an increase in interest rates by 25 basis points,” Powell continued, adding that interest rates could rise more aggressively depending on the consequences of the war in Ukraine.
The Fed chairman reiterated that the central bank would begin to reduce its huge balance sheet of $ 9 trillion. For the past two years, the Fed has bought at least $ 120 billion a month in government securities and mortgage-backed securities to boost the economy.
Last spring and summer, Fed officials insisted that inflation was transient, driven only by bottlenecks in the supply chain and would not require a political response.
For months, the Fed has been planning to raise interest rates for the first time since 2018 this month. Rates were reduced to almost zero during the coronavirus pandemic, as Powell pursued a political goal of maximum employment with a higher tolerance for inflation.
The unemployment rate remains low at 4% until January.
But with the consumer price index now rising 7.5 percent in a year, according to data for January – the highest in 40 years – Powell acknowledged that the central bank needs to return to focusing on curbing inflation.
When the Fed raises its short-term interest rate, borrowing costs also tend to rise for consumer and business loans, including housing, cars and credit cards.
President Biden turned to inflation, which dragged down his polls during his state of the Union on Tuesday.
“So many families live from paycheck to paycheck, struggling to cope with rising food, gas, housing and more,” the president said in a statement. ‘inflation it robs them of the gains they might otherwise feel. I understand. That is why my main priority is to control prices.
Powell was asked by spokesman David Castoff, R-Tenn., If he had caught the president’s remarks about inflation during the address.
‘I’m not. I was too busy preparing for this hearing. I haven’t watched, “Powell admitted.
“I will not tell the president,” Castoff said.
And since Russia invaded Ukraine last week, the United States, along with much of the world, has imposed harsh financial sanctions that threaten to worsen inflation by disrupting supply chains and raising energy prices.
The United States has not yet blocked Russian oil sales, which would add to the problem, but there have been calls for lawmakers on both sides to do so.
The invasion of Ukraine has raised oil prices by about 18% to about $ 110 a barrel, which will make gas more expensive. Some economists predict that average gas prices could soon reach $ 4 a gallon, compared to the national average of $ 3.66 on Wednesday.
A spokeswoman for Ann Wagner, R-Mo., Told Powell that the Keystone pipeline is expected to deliver 800,000 barrels of oil to the United States per day. “Won’t expanding oil supplies by 800,000 barrels of oil a day reduce energy inflation?” She asked.
“We are not responsible for energy policy,” Powell said. “Of course, the laws of supply and demand work.
Asked by Barry Laudermilk, R-Ga., If “reckless spending” had contributed to inflation, Powell said: “I really don’t want to comment on a specific law about all the things we did after the pandemic. The economy is really taking advantage of this, but without a doubt part of what we have done and what Congress has done is also part of why inflation is so high.